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Across the Digital Nation: Craft the proper IT outsourcing message

Apr 01, 2005

Rishi Sood

Information technology outsourcing is a tough sell in the state and local government market. An arena defined largely by the contract structure, scope and transition of ownership, IT outsourcing can be sidetracked and curtailed by obstacles ranging from turf issues and security concerns to labor unions and public opinion.

Although IT outsourcing-related contracts continue to grow slowly and steadily, the state and local market has not yet experienced the explosion of IT outsourcing growth that other industries have.

Over the years, IT outsourcing vendors have learned important lessons in marketing and communication strategies to empower senior state and local officials.

First, vendors now understand that strategic sourcing of finite technology functions can be a much easier road to take from the drawing board to engagement than whole sourcing, in which the government outsources its entire IT infrastructure.

Second, vendors have learned to prioritize communication and human resource strategies to lessen potential doubts, remove unwarranted fears and smooth the transition of government personnel.

Third, the vendor community finally has recognized the benefit that outsourcing advisory firms, such as TPI and Gartner Inc., bring to the contract process in providing methodologies, frameworks and common language for outsourcing. Rather than fight these organizations, vendors now believe that they help build better contract structures for both sides and ensure a common understanding of project responsibilities.

As the IT outsourcing opportunity evolves, vendors should continue to innovate and alter major messages to reflect new market conditions. Today, state and local governments are looking for ways to reduce costs and still efficiently deliver government services. As always, IT outsourcing vendors must be able to identify tangible cost reduction areas.

More important, IT outsourcing vendors also must incorporate the cost-reduction message into long-term cost containment or avoidance measures, which will enable future outsourcing partnerships to focus less on bean counting.

State and local governments truly do seek to transform government operations, and often recognize that new technology is a critical part of this change. However, most government management information systems departments are understaffed and bogged down by daily problems.

Consequently, vendors must make the case that outsourcing day-to-day activities will let government MIS staffs spend more time on aligning technology with business requirements in order to accelerate transformation activities within agencies and across the enterprise.

Vendors also must acknowledge the entrenched nature of some government organizations. In these enterprises, large-scale change comes slowly and often requires an executive order or legislative mandate.

Vendor outreach can be best directed to jurisdictions that are in the midst of a major change, such as a new executive administration, the departure of a chief information officer or business and technology-related crisis.

By sending messages to show the new chief executive officer, CIO or agency director how outsourcing can bring direct benefits, vendors provide the proper context to force top-down change within an enterprise.

Despite the lack of large-scale contracts, there is a still a variety of indications that a major outsourcing trend is within reach. Such factors are the continued departure of CIO-level personnel, the internal skills shortages, an aging technology workforce, the leadership of fiscally minded governors and the appointment of new CIOs with private-sector experience.

The continuing focus by state and local governments on consolidating IT infrastructure and centralizing technology resources provides an initial foundation for future IT outsourcing activities.

These factors should ensure a steady uptick for specific IT outsourcing projects with the possibility of accelerated growth over the next five years.

Rishi Sood is research vice president with Gartner Dataquest in Mountain View, California. His e-mail address is rishi.sood@gartner.com.

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